1. Six years ago you bought a bond for $1,036. The bond has a coupon rate of 7% with semiannual payments and a face value of $1000. Today the bond is worth $976. If you sold the bond today, what rate of return would you have earned on your investment?
a) 5%
b) 6%
c) 7%
d) 8%
2. A stock expects to pay a dividend of $1 in year one and $2 in year two. From that point onward, dividends are expected to grow by 10% per year forever. What is the fair price for this stock if it has a required return of 14%?
a) $27.25 b) $36.33 c) 44.75 d) $55
3. A firm had Net Income of $1,000,000 and paid $60,000 in dividends. Total assets are $8,000,000 and they have $5,000,000 in equity. What is their Sustainable Growth Rate?
a) 5% b) 6% c) 7% d) 8%